Donal O’Riain has been struck by the welcome his company received in the US — and it isn’t just the Christmas card sent by the Department of Energy official who is helping it secure federally supported loans.
The prospect of abundant government funding thanks to the Inflation Reduction Act is prompting Ecocem, an Irish low-carbon cement producer, to double a planned $120mn investment in California as it reorients spending towards the US instead of Europe, he says.
“They are rolling out the carpet for green investment — we were surprised at how personal the contact was,” says O’Riain, Ecocem’s founder and managing director. The “net effect” is that Ecocem, which qualifies for IRA funding on the basis that its cement is produced with carbon emissions that are 40 times lower than average, will “favour further investment in the States [rather] than in the EU”.
Cases like that of Ecocem are prompting a brutal reckoning in the EU, as heads of government prepare for a Brussels summit on February 9-10 aimed at figuring out how to respond to the massive subsidies and buy-America provisions being rolled out under the $369bn IRA. “Europe is in panic mode,” says Dutch MEP Paul Tang.
At stake are the very fundamentals of the EU’s economic model.
Since its inception, the single market has been based on the idea that a level playing field needs to be secured for both the wealthier and poorer nations, and strict limits are therefore needed on state aid that members offer their industries. But even before the US announced its green subsidies, the rules on state aid were already being watered down — in response to the pandemic and the impact of war in Ukraine.
France and its allies are pushing to further loosen the shackles on subsidies as part of an active industrial policy aimed at securing key supply lines, embedding the drive towards its climate objectives, and holding its own in the great power competition between the US and China.